UPDATE: Hancock suit claims accountant caused troubles

Hancock Fabrics Inc. blames its longtime accounting firm for the financial spiral, which ultimately sent the Baldwyn-based company into bankruptcy.

Those allegations come in a lawsuit against PricewaterhouseCoopers LLC (PwC), which first was filed in Circuit Court of Lee County but now has been moved by PwC to federal court.

Hancock wants millions of dollars in damages and fees it said the firm caused to happen.

Hancock says PwC’s arbitrary requirement in 2005 that it change the way it inventoried fabric caused a financial spiral, which led to a host of difficulties.

Thursday, Hancock’s multi-million dollar lawsuit was moved to the U.S. District Court of Northern Mississippi from the Circuit Court of Lee County, where it was originally filed March 13.

PwC asked for the court change, which it says is appropriate because of ongoing bankruptcy proceedings between the accounting firm and Hancock. PwC claims Hancock still owes it at least $678,390 in fees.

Hancock’s Chapter 11 bankruptcy case is filed in Delaware.

PwC claims Hancock’s allegations against it for professional negligence is effectively a counterclaim against PwC’s claim for nonpayment of professional fees, which has a direct bearing on the bankruptcy resolution.